In brief - Further compulsory acquisitions for the M12 and Sydney Metro West projects serve as a timely reminder for stakeholders in the process to be across some of the emerging themes arising from case law
This article provides a snapshot of various recent developments in compulsory acquisition law in New South Wales over the last two years. These have the potential to dramatically impact the resumption process and the amount of compensation (if any) that can be claimed.
The 6 month pre-acquisition negotiation period
of the Land Acquisition (Just Terms Compensation) Act 1991
(NSW) (Just Terms Act
) was only recently introduced with the 2017 amendments following the Russel Review
into that Act. It provides a minimum period of six months during which the acquiring authority needs to make a "genuine attempt to acquire the land by agreement" before giving a proposed acquisition notice (PAN). The Russell Review provided the underlying rationale for the new negotiation period - to "encourage parties to direct substantial efforts towards reaching agreement by the end of the fixed negotiation period". Whether that is being delivered in practice remains debated; many applicants consider that it is being observed superficially.
Questions remain as to what a "genuine attempt" means and how substantial the efforts need to be. For example:
- Does an acquiring authority need to provide one at least offer of compensation to reach a genuine attempt status?
- Can the acquiring authority do nothing for five months and start negotiating in the last month?
- Can the negotiation change from being an acquisition about one interest in land and morph into something different?
The Court found (against the applicant) that there was in fact eight months of negotiations for the purposes of section 10A, rather than five months. This was despite:
- the acquiring authority itself having asked for permission from the Minister seeking to reduce the six month period
- some of the negotiation time being connected with an earlier (voluntary) EOI process rather than resumption compulsory acquisition process under the Just Terms Act, and
- the land that was the subject of that negotiation being ultimately different to the land that was to be compulsorily acquired
This meant that the Health Administration Corporation's request to shorten the genuine attempt period to five months was stated by the Court to have been unnecessary.
Interestingly, the Court also vindicated the abridgement of the PAN period from six months to three months. Normally, the minimum period after a PAN is issued and before the gazettal of an acquisition notice is six months. However, it can be varied where the Minister responsible for the acquiring authority approves a shorter period, but only if that Minister is satisfied that the urgency of the matter or other circumstances of the case make it impracticable to give any longer period of notice. The stated urgency related to both the Tweed Valley community's need for a new hospital and also the lead times and constraints concerning obtaining site information, preparing construction plans and commencing the works. These factors were held to be sufficient.
All of the above points to the courts moving towards a more facultative interpretation of the processes involved with the Just Terms Act, and a more sympathetic view to project exigencies determining impracticability.
Desane decision highlights difficulties in challenging an acquisition
Given the attention Desane received and the multi-faceted attack on the validity of the acquisition, it is an important decision to consider and will reverberate amongst those concerned about the process and an acquiring authority's power for years to come.
There were two issues said to invalidate the acquisition. The first related to the failure to properly follow the approved form for the PAN. The Court of Appeal's decision (anchored closely with Project Blue Sky v Australian Broadcasting Authority  HCA 28
) was that the Just Terms Act
was intended to establish procedural requirements for compulsory acquisitions, rather than act as a protection of the private rights of landowners. Against this light, the purpose of the Just Terms Act could not be said to disclose that a breach would result in invalidity.
The second issue related to a failure to identify the public purpose in the PAN. The precursor to the Just Terms Act (the Public Works Act 1912) contained such a requirement but the Just Terms Act does not. The Court held that this shift indicated an intention of the drafters to move away from this requirement. In addition, the fact the cover letter disclosed the purpose was also relevant to the findings.
In relation to the improper purpose argument put, namely that RMS was not acquiring the land in order to construct a road but rather to provide open space and green parkland, the Court focused on the intention at the time of the acquisition. Rather than retrospectively looking at the purpose, the Court held that one needs to consider the purpose at the time of the notice. The fact that over time an authority changes its proposed use of the acquired land to something different to that previously identified is not material.
Difficulties in claiming disturbance for lessees and business owners
However, the Court of Appeal has now changed the landscape adopting a purposive and contextual approach to the words in the section, rather than over relying on dictionary definitions and the plain reading of the provision.
The facts of the case were:
- United Petroleum ran a service station and restaurant business on land owned by two related special purpose companies.
- Those companies had an oral lease with United Petroleum, terminable on one month's notice.
- RMS acquired the land in August 2015, and United Petroleum could not relocate its business.
- United Petroleum claimed compensation for disturbance under the head of disturbance (section 55(d) and section 59(1)(f) of the Just Terms Act).
- The Land and Environment Court awarded (among other items) approximately $2,000,000 as the capitalised sum for the loss of the business.
To claim compensation, the cost needed to fall within category (f) within section 59(1):
any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.
Four different judgments were handed down, including a judgment from Chief Justice Preston of the Land and Environment Court sitting on the Court of Appeal for this matter in which he offered a "palinode" expressing a change of opinion to the decision in George D Angus Pty Ltd v Health Administration Corporation  NSWLEC 212; 205 LGERA 357
. While the different judgments make it difficult to distil a statement of unified principle, the judgments reign in the types of disturbance claims that are claimable by lessees.
For business owners leasing land, the important takeaway from the judgment is that there is now a "temporal" constraint applying to these claims - compensation will be fixed by reference to the term of the acquired interest.
This is having considerable impacts for matters that were in Court before the decision, as well as new acquisitions that have been proposed following the decision. It raises issues for both urban and rural acquisitions alike - anywhere where a lease is acquired. More contentious negotiations and new litigation may emerge as a result, as applicants try to "shoehorn" claims under the other heads of compensation opened up by this decision.
Betterment planning issue in Barkat v RMS
The most recent decision where "betterment" has been raised is the Court of Appeal's decision in Barkat v Roads and Maritime Services  NSWLEC 209
. A significant issue before the primary judge was the requirement in section 56(1)(a)
of the Just Terms Act
to disregard any increase in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. RMS had acquired the land for the purpose of the WestConnex Project and argued planning and transportation strategies explained the WestConnex Project, which included the draft Parramatta Road Urban Transformation Strategy, published by Landcom (the PRUTS). The Barkats contended that PRUTS would have sent a significantly overt signal to the market that their land would be rezoned to R4 in the short term.
The Court of Appeal held there was no error of the primary Judge in the Land and Environment Court for finding that the WestConnex Project was specifically designed to be the catalyst for much more than a road development scheme. In that regard, it was purposely an urban renewal project from the outset, interfacing with the draft PRUTS and involving an integrated project team, including the WestConnex Delivery Authority, RMS, the Department of Planning and Environment, Strathfield Council and others. To that end, the Court of Appeal held there was no error in finding it is not necessary for RMS to be the rezoning authority, but it was sufficient for its WestConnex Project to be the intended catalyst for predicting urban renewal and associated rezoning that would most likely follow.
The decision will require careful interrogation of the causal connections between the public purpose and upzoning or planning betterment in future acquisitions.
Subsurface acquisitions and compensation
Finally, with long, expensive and complex tunnels being built around Sydney for new infrastructure, a question which arises time and time again is whether the interest in land being acquired is compensable.
The two statutes being used to justify an exception to the payment for compensation are section 62
of the Just Terms Act
and Schedule 6B
of the Transport Administration Act 1988
Common to both provisions, if the land above the substratum is disturbed, or the support of that surface is destroyed or injuriously affected by construction, then the ability to claim compensation is reopened for the dispossessed landowner.
While numerous tunnels throughout NSW have now been built without any significant judicial analysis of these provisions, there are a few decisions of importance.
As a result, we continue to have limited judicial consideration on two matters raised in the case:
- whether a reduction in the development or redevelopment potential of the land above the tunnel stratum as a consequence of the actual or future existence of such a tunnel would open the gateway to a claim for compensation, and
- whether a settlement of 5 mm would be significant enough to open the gateway to making a claim for compensation (something which the review of environmental factors for the Metro project had postulated as a worst case prediction).
These will no doubt be tested in the coming wave of acquisitions as tunnels are built beneath significant and expensive Sydney real estate with redevelopment potential.
A case involving section 62
of the Just Terms Act
is a decision of Pain J in Azizi v Roads and Maritime Services  NSWLEC 97
where land for the NorthConnex tunnel was compulsorily acquired from the applicants by RMS. That was also held to fall within the meaning of section 62(2) of the Just Terms Act
, meaning there was no requirement to compensate the landowners for the acquisition of substratum interests. There was no actual disturbance of the surface of the applicants' land or injurious affection to the support of the surface.
With the large tranches of compulsory acquisitions proceeding around the state and in particular within Sydney, navigating not only the process but the compensation principles is becoming more complex and requires a nuanced understanding of the law applied to the facts at hand. Stamp duty claims, novel disturbance situations, and special value claims are likely to be debated in the next few years of case law.